nep-eur New Economics Papers
on Microeconomic European Issues
Issue of 2013‒03‒09
twenty papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Integration and convergence in European electricity markets By Carlo Andrea Bollino; Davide Ciferri; Paolo Polinori
  2. Corporate taxation and the quality of research and development By Ernst, Christof; Richter, Katharina; Riedel, Nadine
  3. A spatial panel data analysis of crime rates in EU By Lauridsen, Jørgen T.; Zeren, Fatma; Ari, Ayse
  4. Skilled labor flows : lessons from the European Union By Kahanec, Martin
  5. Long-term intergenerational persistence of human capital: an empirical analysis of four generations By Lindahl, Mikael; Palme, Mårten; Sandgren Massih, Sofia; Sjögren, Anna
  6. The labor market impact of refugee immigration in Sweden 1999–2007 By Ruist, Joakim
  7. Value of land use for carbon sequestration: An application to the EU climate policy. By Gren, Ing-Marie Gren; Elofsson, Katarina
  8. The Market for Tractors in the EU: Price Differences and Convergence By Jörgensen, Christian; Persson, Morten
  9. What are the Channels for Technology Sourcing? Panel Data Evidence from German Companies By Dietmar Harhoff; Elisabeth Mueller; John Van Reenen
  10. Immigrant Women and Entrepreneurship: A Study of the Health Care Sector in Sweden, 2002-2006 By Korpi, Martin; Hedberg, Charlotta; Pettersson, Katarina
  11. Prices vs. Quantities: Incentives for Renewable Power Generation - Numerical Analysis for the European Power Market By Nagl, Stephan
  12. Employment protection and parental child care By Olsson, Martin
  13. Policy Deviations, Uncertainty, and the European Court of Justice By Carsten Hefeker; Michael Neugart
  14. What is the productivity change of a university TTOs system at its early stage of development? Evidence from France By Claudia Curi; Cinzia Daraio; Patrick Llerena
  15. How fit are feed-in tariff policies ? evidence from the European wind market By Zhang, Fan
  16. In-Work Benefits and the Nordic Model By Kolm, Ann-Sofie; Tonin, Mirco
  17. Identifying Factor Productivity from Micro-data: The case of EU agriculture By Petrick, Matin; Kloss, Mathias
  18. Composition effects of the German Federal Government on the average top income tax burden By Scharfenkamp, Katrin
  19. Deductibles and the Demand for Prescription Drugs: Evidence from French Data By Marc Perronnin; Bidénam Kambia-Chopin
  20. Revisiting the porter hypothesis: An empirical analysis of green innovation for the Netherlands By Leeuwen, George van; Mohnen, Pierre

  1. By: Carlo Andrea Bollino; Davide Ciferri; Paolo Polinori
    Abstract: In this paper we investigate wholesale electricity prices integration process in the main European markets. After reforms introduced in the last decades in Europe, wholesale electricity prices are now determined in regulated markets. However, while market institutional frameworks show several similarities, there are still differences in fuel mix, generation units technologies, market structure. Using multivariate cointegration techniques we test integration dynamics within four European markets (Austria, Germany, France and Italy) for which we have collected a novel dataset of spot prices from 2004 to 2010. We provide evidence that German market constitutes a common stochastic trend driving the long-run behavior of other markets. Our results are robust to causality test, to Granger causality test, to oil price relevance test and provide additional evidence to assess the efficient market hypothesis in European electricity markets.
    Keywords: European electricity markets, electricity spot prices, cointegration, structural MA representation
    JEL: C32 L16 Q41
    Date: 2013–01–14
  2. By: Ernst, Christof; Richter, Katharina; Riedel, Nadine
    Abstract: This paper examines the impact of tax incentives on corporate research and development (R&D) activity. Traditionally, R&D tax incentives have been provided in the form of special tax allowances and tax credits. In recent years, several countries moreover reduced their income tax rates on R&D output. Previous papers have shown that all three tax instruments are effective in raising the quantity of R&D related activity. We provide evidence that, beyond this quantity effect, corporate taxation also distorts the quality of R&D projects, i.e. their innovativeness and revenue potential. Using rich data on corporate patent applications to the European patent office, we find that a low tax rate on patent income is instrumental in attracting innovative projects with a high earnings potential and innovation level. The effect is statistically significant and economically relevant and prevails in a number of sensitivity checks. R&D tax credits and tax allowances are in turn not found to exert a statistically significant impact on project quality. --
    Keywords: corporate taxation,research and development,micro data
    JEL: H3 H7 J5
    Date: 2013
  3. By: Lauridsen, Jørgen T. (Centre of Health Economics Research (COHERE)); Zeren, Fatma (Department of Econometrics); Ari, Ayse (Department of Economics)
    Abstract: The study investigates selected factors affecting crime rates in the EU-15 countries during the years 2000 to 2007 with an especial focus on inflation rate, level of education, income and employment. While these topics have been investigated in former studies, the present study adds by introducing spatial panel data methods to the case. Regarding the effects of these factors, the present study obtains results comparable to those from former studies, whereby the robustness of these are confirmed.
    Keywords: Determinants of crime rates; cost-benefit analysis of crime; EU countries; spatial panel data analysis
    JEL: A12 C50 K40
    Date: 2013–01–10
  4. By: Kahanec, Martin
    Abstract: This study evaluates European Union (EU) experience of the mobility of skilled labor migrants after the 2004 and 2007 EU enlargements and from the European Neighborhood Policy (ENP) countries. The study concludes that migration generally improves the allocated efficiency of labor markets and there is little if any evidence of statistically significant or economically relevant negative aggregate effects of migration on receiving labor markets. While outflow of young and skilled workers may pose risks to sending countries'economic prospects and public finance, circular migration, brain gain, and remittances attenuate such risks, and have the potential to become powerful engines of convergence. Obstructive legislation and ill-designed migration policies impede migration and deprive sending and receiving of such potential benefits.
    Keywords: Population Policies,Labor Markets,Labor Policies,Health Monitoring&Evaluation,Voluntary and Involuntary Resettlement
    Date: 2013–02–01
  5. By: Lindahl, Mikael (Uppsala University, CESifo, IFAU, IZA and UCLS); Palme, Mårten (Dept. of Economics, Stockholm University); Sandgren Massih, Sofia (Uppsala University); Sjögren, Anna (IFAU, UCLS and SOFI Stockholm University)
    Abstract: Most previous studies of intergenerational transmission of human capital are restricted to two generations – parents and their children. In this study we use a Swedish data set which enables us link individual measures of lifetime earnings for three generations and data on educational attainments of four generations. We investigate to what extent estimates based on income data from two generations accurately predict earnings persistence beyond two generations. We also do a similar analysis for intergenerational persistence in educational attainments. We find two-generation studies to severely under-predict intergenerational persistence in earnings and educational attainment over three and four generations.
    Keywords: Intergenerational income mobility; Human capital transmission; Multigenerational income mobility
    JEL: D31 J62
    Date: 2013–01–16
  6. By: Ruist, Joakim (Department of Economics, University of Gothenburg)
    Abstract: This study estimates labor market effects of refugee immigration in Sweden 1999–2007. The setting is particularly suitable for using spatial variation within the country to estimate labor market effects of immigration. Bias from endogenous immigrant settlement is likely to be smaller when estimating the effect of only refugee immigration. Bias from internal migration of previous inhabitants is reduced by using data where the same individuals are identified over time. No significant effect of refugee immigration on total unemployment is found, but there is a large effect on the unemployment of previous immigrants from low- and middle-income countries, indicating that newly arrived refugee immigrants are substantially more easily substituted for this group than for natives in production.
    Keywords: unemployment; refugee immigration
    JEL: J23 J61 J64
    Date: 2013–02–14
  7. By: Gren, Ing-Marie Gren (Department of Economics, Swedish University of Agricultural Sciences); Elofsson, Katarina (Department of Economics, Swedish University of Agricultural Sciences)
    Abstract: This paper applies the replacement cost method for calculating the value of stochastic carbon sequestration in the EU climate policy for mitigating carbon dioxide emissions. Minimum costs with and without carbon sequestrations are then derived with a safety-first approach in a chance-constrained framework for two different scenarios; one with the current system for emission trading in combination with national allocation plans and one with a hypothetical system where all sectors trade. The theoretical results show that i) the value of carbon sequestration approaches zero for a high enough risk discount, ii) relatively low abatement cost in the trading sector curbs supply of permits on the ETS market, and iii) large abatement costs in the trading sector create values from carbon sequestration for meeting national targets. The empirical application to the EU commitment of 20% reduction in carbon dioxide emissions shows large variation in carbon sequestration value depending on risk discount and on institutional set up. Under no uncertainty, the value can correspond to approximately 0.45% of total GDP in EU under current policy system, but it is reduced to one third if all sectors are allowed to trade. The value declines drastically under conditions of uncertainty and approaches zero for high probabilities in achieving targets. The allocation of value among countries depends on scenario; under the current system countries make gains from reduced costs of meeting national targets, under a sector-wide trading scheme buyers of permits gain from reductions in permit price and sellers make associated losses.
    Keywords: carbon sequestration value; replacement cost method; uncertainty; safety-first; chance-constrained programming; EU emission target
    JEL: C61 D81 Q40 Q48 Q50
    Date: 2013–02–18
  8. By: Jörgensen, Christian; Persson, Morten
    Abstract: This study evaluates the degree of segmentation of the market for agricultural machinery and equipment in the EU. We focus on agricultural tractors, the most common and biggest investment in machinery and equipment in the agricultural sector. By using country price data for individual tractor models, we test the law of one price, i.e. the existence of a common price for tractors across EU member states. We find that significant price differences exist, yet unlike most other studies we find that large price deviations are penalised within a short time. The study also shows that transport costs are an important source of price differences, as domestic production leads to lower prices on the domestic market and as price convergence is negatively correlated with distance. Finally, price differences should not solely be understood from a geographical perspective, as evidence supports the idea that farmers’ buying power is significant in explaining price differences within countries.
    Date: 2013–01
  9. By: Dietmar Harhoff; Elisabeth Mueller; John Van Reenen
    Abstract: Innovation processes within corporations increasingly tap into international technology sources, yet little is known about the relative contribution of different types of innovation channels. We investigate the effectiveness of different types of international technology sourcing activities using survey information on German companies complemented with information from the European Patent Office. German firms with inventors based in the US disproportionately benefit from R&D knowledge located in the US. The positive influence on total factor productivity is larger if the research of the inventors results in co-applications of patents with US companies. Moreover, research cooperation with American suppliers also enables German firms to better tap into US R&D, but cooperation with customers and competitors does not appear to aid technology sourcing. The results suggest that the "brain drain" to the US can have upsides for corporations tapping into American know-how.
    Keywords: technology sourcing, knowledge spillovers, productivity, open innovation
    JEL: O32 O33
    Date: 2013–03
  10. By: Korpi, Martin (Institute for Economic and Business History Research, Stockholm School of Economics); Hedberg, Charlotta (Stockholm University Linnaeus Center for Integration Studies - SULCIS); Pettersson, Katarina (Nordic Centre for Spatial Development)
    Abstract: Using unique Swedish longitudinal full-population data and logistic regression, this paper explores whether start-ups of foreign born female heath care workers are structurally (i.e. comparatively higher unemployment and lower wages) or culturally (defined as country of birth) motivated. While structural factors are significantly related to female entrepreneurship regardless of origin, no additional effect is found whether for foreign born more broadly defined, or when adding specific country of birth. Thus, we conclude that structural disadvantage motives, based on gender rather than ethnicity, dominate over possible cultural motives for entrepreneurship.
    Keywords: Immigration; Gender; Entrepreneurship
    JEL: I11 J15 J16 L26
    Date: 2013–02–14
  11. By: Nagl, Stephan (Energiewirtschaftliches Institut an der Universitaet zu Koeln)
    Abstract: This paper outlines the effects of weather uncertainty on investment and operation decisions of electricity producers under a feed-in tariff and renewable quota obligation. Furthermore, this paper tries to quantify the sectoral welfare and investments risks under the different policies. For this purpose, a spatial stochastic equilibrium model is introduced for the European electricity market. The numerical analysis suggests that including the electricity market price in renewable policies (wholesale price + x) reduces the loss of sectoral welfare due to a renewable policy by 11-20 %. Moreover, investors face an only slightly higher risk than under fixed price compensations. However, electricity producers face a substantially larger investment risk when introducing a renewable quota obligation without the option of banking and borrowing of green certi cates. Given the scenario results, an integration of the hourly market price in renewable support mechanisms is mandatory to keep the financial burden to electricity consumers at a minimum. Additionally, following the discussion of a European renewable quota after 2020, the analysis indicates the importance of an appropriate banking and borrowing mechanism in light of stochastic wind and solar generation.
    Keywords: RES-E policy; price and quantity controls; mixed complementarity problem
    JEL: C61 L50 Q40
    Date: 2013–02–18
  12. By: Olsson, Martin (Research Institute of Industrial Economics (IFN))
    Abstract: I examine if employment protection affects parental childcare. I find that a softer employment protection has a substantial effect on how parents use and divide paid childcare between them. The identification relies on a reform that made it easier for employers in Sweden to dismiss workers in small firms. I estimate that a softer employment protection reduces the total days of parental childcare in targeted firms, measured as total days of parental leave or temporary parental leave. Both a sorting effect and a behavioral effect can explain the reduced childcare. I also find evidence of a redistribution effect of paid parental childcare within households if only one partner was affected by the reform. I interpret the redistribution effect as a way of evading an external cost on the child.
    Keywords: Employment protection; parental childcare; within family distribution
    JEL: J13 K13
    Date: 2013–01–14
  13. By: Carsten Hefeker (University of Siegen); Michael Neugart (University of Darmstadt)
    Abstract: The implementation of European Union directives into national law is at the discretion of member states. We analyze incentives for member states to deviate from these directives when the European Commission may sue a defecting member state and rulings at the European Court of Justice (ECJ) are uncertain. We find that higher uncertainty about the preferences of the ECJ increases policy deviation, irrespective of whether a case is taken to court or not. If decisions of member states to deviate are independent, the incidence of filed cases decreases while for thos policies reaching the ECJ deviations increase.
    Keywords: European Union law, directives, compliance, European Court of Justice, court behavior, uncertainty, legal process, European Commission
    JEL: D72 D78 K41
    Date: 2013
  14. By: Claudia Curi (School of Economics and Management, Free University of Bozen-Bolzano); Cinzia Daraio (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); Patrick Llerena (University of Strasbourg, BETA (Bureau d'Economie Théorique et Appliquée) and Observatoire des Sciences et Techniques (OST, Paris))
    Abstract: This paper assesses the performance in technology transfer operated by the French university system adopting a Malmquist approach within an inferential setting. It investigates an original and unique database of French TTOs over their first development time. We find an overall weak increase in productivity, driven by technology and organisational improvement related to a small number of TTOs. More specifically, most TTOs show a stable innovative behaviour (i.e. no significant technical change) and only half of the system experiences a decline in efficiency change suggesting the lack of one best business model able to fit the entire system. Finally, we find that, on average, the presence of university-related hospital dampens TTOs’ efficiency and TTO´s seniority has a positive effect on productivity, enhancing simultaneously efficiency and innovation
    Keywords: Technology Transfer Offices (TTOs; French University System; Malmquist Index; Data Envelopment Analysis (DEA); Bootstrap
    Date: 2013–03
  15. By: Zhang, Fan
    Abstract: Feed-in tariffs have become the most widely used policy instrument to promote renewable energy deployment around the world. This paper examines the relation between tariff setting and policy outcome based on wind capacity expansion in 35 European countries over the 1991-2010 period. Using a dynamic panel data model, it estimates the long-run elasticity of wind deployment with respect to the level of feed-in support. The analysis finds that higher subsidies do not necessarily yield greater levels of wind installation. Non-economic barriers and rent-seeking may have contributed to the weak correlation. On the other hand, the length of feed-in contract and guaranteed grid access are important determinants of policy effectiveness. A one-year extension of an original 5-year agreement on average increases wind investment by 6 percent annually, while providing an interconnection guarantee almost doubles wind investment in one year.
    Keywords: Energy Production and Transportation,Climate Change Mitigation and Green House Gases,Carbon Policy and Trading,Climate Change Economics,Markets and Market Access
    Date: 2013–02–01
  16. By: Kolm, Ann-Sofie (Dept. of Economics, Stockholm University); Tonin, Mirco (University of Southampton (and Central European University, Budapest; IZA, Bonn))
    Abstract: Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works through wage moderation and job creation. The benefits make it more important to hold a job, thus lower wages will be accepted, and more jobs created. Moreover, we show that the incentive to acquire higher education improves, further boosting employment in the long run. These positive effects help counteracting the negative impact of taxation.
    Keywords: Nordic model; in-work benefits; wage adjustment; unemployment; education; skill formation; earnings
    JEL: H24 J21 J24
    Date: 2013–01–10
  17. By: Petrick, Matin; Kloss, Mathias
    Abstract: The classical problem of agricultural productivity measurement has regained interest owing to recent price hikes in world food markets. At the same time, there is a new methodological debate on the appropriate identification strategies for addressing endogeneity and collinearity problems in production function estimation. We examine the plausibility of four established and innovative identification strategies for the case of agriculture and test a set of related estimators using farmlevel panel datasets from seven EU countries. The newly suggested control function and dynamic panel approaches provide attractive conceptual improvements over the received ‘within’ and duality models. Even so, empirical implementation of the conceptual sophistications built into these estimators does not always live up to expectations. This is particularly true for the dynamic panel estimator, which mostly failed to identify reasonable elasticities for the (quasi-) fixed factors. Less demanding proxy approaches represent an interesting alternative for agricultural applications. In our EU sample, we find very low shadow prices for labour, land and fixed capital across countries. The production elasticity of materials is high, so improving the availability of working capital is the most promising way to increase agricultural productivity.
    Date: 2013–01
  18. By: Scharfenkamp, Katrin
    Abstract: This paper investigates whether the setting of the German top income tax burden is affected by the composition of the Federal Government in terms of connectedness with the national (academic) elite and company network from 1958 to 2011. The results reveal that the percentages of university graduates, former executive board members, as well as the governments average age at the time of decision are related to a lower average top income tax burden. Conversely and surprisingly, an increasing percentage of former members of a supervisory board is associated with a higher average top income tax burden. Interestingly, varying percentages of governmental members with an elitist social background are not aligned with the tax setting. Finally, the higher the difference of mandates between CDU & CSU and those of the SPD in the German Parliament, the lower is the average top income tax burden. -- Dieses Papier untersucht, ob die Festlegung der durchschnittlichen Steuerbelastung deutscher Spitzenverdiener zwischen 1958 und 2011 von der Zusammensetzung der Bundesregierung in Form von Verbindungen zur nationalen (akademischen) Elite und dem Unternehmensnetzwerk beeinflusst wird. Die Ergebnisse zeigen, dass der Anteil an Universitätsabsolventen, früheren Vorstandsmitgliedern und das durchschnittliche Alter der Regierung zum Zeitpunkt der Entscheidung mit einer durchschnittlich niedrigeren Steuerbelastung deutscher Spitzenverdiener verbunden sind. Im Gegensatz hierzu und überraschenderweise ist ein steigender Anteil früherer Aufsichtsratsmitglieder mit einer durchschnittlich höheren Steuerbelastung deutscher Spitzenverdiener verknüpft. Interessanterweise findet sich keine Verbindung eines variierenden Anteils von Regierungsmitgliedern mit elitärem Hintergrund auf Spitzensteuerlast. Schließlich ist die durchschnittliche Steuerbelastung deutscher Spitzenverdiener umso geringer, je höher die Differenz an Bundestagsmandaten zwischen CDU/CSU und SPD ist.
    JEL: D83 D85 H24 P16
    Date: 2013
  19. By: Marc Perronnin (IRDES Institute for research and information in health economics); Bidénam Kambia-Chopin (MSSS Ministère de la Santé et des services sociaux, Québec(Canada))
    Abstract: On January 1st 2008, a 0.5€ deductible levied on every prescription drug package purchased was introduced in France. This study aims at shedding light on the effect of this policy on prescription drug purchasing behavior among the targeted individuals. Declared behavior from a cross-sectional study based on participants in the French Health, Health Care and Insurance Survey of 2008. The determinants of having changed one’s prescription drugs consumption following the introduction of deductibles were explored based on the socio-behavioral model of Andersen and an economic model of drug demand. The empirical analysis used a logistic regression. All other factors being equal, individuals’ probability of having modified their drug consumption behaviour following the introduction of deductibles decreases with income level and health status (self-assessed health and suffering from a chronic disease). Deductibles on prescription drugs represent a significant financial burden for low-income individuals and those in poor health, with the potential effect of limiting their access to drugs.
    Keywords: User fees, Out-of-pocket payment, Prescription drugs, Financial access, France.
    JEL: D81
    Date: 2013–02
  20. By: Leeuwen, George van (Centraal Bureau voor Statistiek); Mohnen, Pierre (UNU-MERIT/MGSoG)
    Abstract: Almost all empirical research that has attempted to assess the validity of the Porter hypothesis has started from reduced-form models, e.g. by using single-equation models for estimating the contribution of environmental regulation (ER) to productivity. This paper addresses the Porter Hypothesis within a structural approach that allows us to test what is known in the literature as the "weak" and the "strong" version of the Porter hypothesis. Our "Green Innovation" model includes three types of eco investments and non-eco R&D to explain differences in the incidence of innovation. Besides product and process innovations we recognize eco-innovation as a separate type of innovation output. We explicitly model the potential synergies of introducing the three types of innovations simultaneously and their synergy in affecting total factor productivity (TFP) performance. Using a comprehensive panel of firm-level data built from four surveys we aim to estimate the relative importance of energy price incentives as a market based type of ER and the direct effect of environmental regulation on eco investment and firms' decisions regarding the introduction of several types of innovations. The results of our analysis show a strong corroboration of the weak version of the Porter hypothesis but not of the strong version of the PH, in this case on TFP performance.
    Keywords: Porter Hypothesis, green innovation, environmental regulation, innovation complementarities, productivity
    JEL: H23 L5 O32 O38 Q55
    Date: 2013

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